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Synchronized Not Coronavirus

There is an understandable tendency to just write off this weekend’s disastrous Chinese data as nothing more than pandemic politics. After all, it has…

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There is an understandable tendency to just write off this weekend’s disastrous Chinese data as nothing more than pandemic politics. After all, it has been Emperor Xi’s harsh lockdowns spreading like wildfire across China rather than any disease (why it has been this way, that’s another Mao-tter). Open the cities back up, as many are doing right now, the world goes right back to normal.

That’s the thought and engrained expectation.

Except, we heard this all the time last year and this year is anything but back to normal. Early 2021’s winter’s wave. Delta-COVID summer. OMG Omicron. Close down whatever part of the global economy, it drops off, yet upon reopen it never quite gets all the way back let alone reaches normality.

It’s that underlying, or overlaying, trend which is shaping up the future of 2022 and beyond. And it’s becoming harder and harder to ignore in the one place the “inflation” illusion struck hardest: global shippers (who have been its chief beneficiaries).

Below comes from FreightWaves just last week before the China data dump:

[CFO Mark] Frese noted that rates are particularly weak out of China, where Hapag-Lloyd [world’s fifth-largest shipping line] sees lockdowns currently reducing outbound volumes by 20%-25%. But he said that COVID-driven export snags in China are coinciding with declines in import demand in places such as Europe.

Frese said he expected spot rates to come down “even if congestion stays at the [current] level or even if there are new reasons [for congestion], due to the overall sentiment we are seeing right now that demand is softening.” [emphasis added]

Shanghai and Beijing Zero-COVID are the reasons why the Chinese Big Three fell as hard as they did, yet those declines only add more negative pressures to an economy already facing what Economists are always quick to call “headwinds.”

You can see those “headwinds” independent of various and temporary lockdowns. One clear example of them is Fixed Asset Investment. While the April 2022 estimate was a YTD increase (accumulated) of 6.3%, that was down from March’s 9.3% and January/February 12.2%. On a chained monthly basis, FAI overall actually fell 0.82% during April when compared to March, which is consistent with city-scale quarantines.




And while that’s true, true weakness in FAI dates back to last November (pictured immediately above). Might these COVID politics be a way to mask China’s economic weakness as its economy no longer “benefits” from heavy real estate “investment” (Evergrande) as in the past?

Everyone is told to put these awful economic numbers into the context of the ongoing struggle against the pandemic, therefore, upon reopening, filling in the blanks, reopening means normal. If it isn’t the pandemic rather real estate, the latter would better explain why, moving beyond FAI, Chinese retail sales haven’t come anywhere close to recovery – regardless of their massive April decline (-11.1% y/y).

China’s consumers have been the clear laggard for long before last month. Retail sales continue to drop further and further behind even 2019’s already-harmful trend, only more so each month when some or any lockdowns are present.



As far as external demand for what China makes, or used to, Industrial Production in April also fell, declining 2.9% when compared to output in April 2021. While an enormous decline, second-worst in modern Chinese history, behind only January-February 2020, again, it’s the preceding trend which better paints the bigger picture.

Maybe the best example yet comes from another official dataset released last Friday. The People’s Bank of China’s Financial Statistics Report was everything you’d have expected from Euro$ #5 reaching into the Chinese economy and financial system.

Total loans, both rmb and in foreign currencies, grew by 10.6% y/y also in April. While that sounds terrific given the huge minuses everywhere else in the real economy, 10.6% is the slowest rate of credit expansion in more than twenty years. Just rmb loans, the y/y rate dropped by half a percentage point March to April to also the worst in two decades.

China’s economy, as you can see below, seems to be quite sensitive to second derivative changes in credit.



Yes, lockdowns in April, but, again, this drop only adds to what has already been a prior trend in Chinese credit dating back more than a year.

Household loans (in rmb) declined for the second month out of the previous three (April and February), the first time that’s ever happened and not a very good sign insofar as the real estate situation may be concerned.

Foreign currency loans, though a small part of China’s credit system, this one’s only-too-consistent with Euro$ #5 and how over the past few months when CNY has collapsed that collapse isn’t “devaluation” but another headwind for a struggling China to face in the form of tightening global money (to then get transmitted to the rest of the world via the real economy contagion of fewer imports to China).


CNY DOWN = NO MORE $s. And that’s bad.

It was a calamitous weekend of Chinese data that doesn’t seem so bad if viewed through the COVID prism. And I think, in one important sense, that’s the point.

If you’re Mao Xi, making economic woes appear as if the benevolent if harsh struggle against “natural” forces – while at the same time reinforcing the government’s authority – would be far more preferential than what’s really happening there. An economic situation beyond the control and efforts of authorities.

While recession fears rise over here, how much of one might already be happening over there? And if that is the case, the keyword for the world going forward is synchronized, not coronavirus.

 

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Economics

Expert on Bath & Body Works: ‘an easy double the next three years’

Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says…

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Bath & Body Works Inc (NYSE: BBWI) might have been painful for the shareholders this year, but the road ahead will likely be a rewarding one, says the Senior Vice President and Portfolio Manager at Westwood Group.

BBWI separated from Victoria’s Secret

The retail chain separated from Victoria’s Secret in 2021, which, as per Lauren Hill, clears the way for a 100% increase in the stock price in the coming years. On CNBC’s “Closing Bell: Overtime”, she said:

[Bath & Body Works] has really strong pricing power. They have 85% of their supply chain in the United States and with the Victoria’s Secret brand now gone, I think it’s a wonderful buy; an easy double the next three years.

Last month, the Columbus-headquartered company reported results for its fiscal first quarter that topped Wall Street expectations.

Bath & Body Works is a reopening play

The stock currently trades at a PE multiple of 6.64. Hill is convinced Bath & Body works is a reopening name and will perform so much better as the world continues to pull out of the pandemic. She noted:

Customers have missed buying their scented products in store and as their social occasion calendars fill up, they are getting back out there and buying more gifts, including Bath & Body Works products.

Hill also dubbed BBWI a great pick amidst the ongoing inflationary pressures because of its reasonably priced products. Shares are down more than 50% versus the start of 2022.

The post Expert on Bath & Body Works: ‘an easy double the next three years’ appeared first on Invezz.

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Economics

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A…

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Majority Of C-Suite Execs Thinking Of Quitting, 40% Overwhelmed At Work: Deloitte Survey

Authored by Naveen Anthrapully via The Epoch Times,

A majority of C-suite executives are considering leaving their jobs, according to a Deloitte survey of 2,100 employees and C-level executives from the United States, Canada, the UK, and Australia.

Almost 70 percent of executives admitted that they are seriously thinking of quitting their jobs for a better opportunity that supports their well-being, according to the survey report published on June 22. Over three-quarters of executives said that the COVID-19 pandemic had negatively affected their well-being.

Roughly one in three employees and C-suite executives admitted to constantly struggling with poor mental health and fatigue. While 41 percent of executives “always” or “often” felt stressed, 40 percent were overwhelmed, 36 percent were exhausted, 30 percent felt lonely, and 26 percent were depressed.

“Most employees (83 percent) and executives (74 percent) say they’re facing obstacles when it comes to achieving their well-being goals—and these are largely tied to their job,” the report says. “In fact, the top two hurdles that people cited were a heavy workload or stressful job (30 percent), and not having enough time because of long work hours (27 percent).”

While 70 percent of C-suite execs admitted to considering quitting, this number was at only 57 percent among other employees. The report speculated that a reason for such a wide gap might be the fact that top-level executives are often in a “stronger financial position,” due to which they can afford to seek new career opportunities.

Interestingly, while only 56 percent of employees think their company executives care about their well-being, a much higher 91 percent of C-suite administrators were of the opinion that their employees believe their leaders took care of them. The report called this a “notable gap.”

Resignation Rates

The Deloitte report comes amid a debate about resignation rates in the U.S. workforce. Over 4.4 million Americans quit their jobs in April, with job openings hitting 11.9 million, according to the U.S. Department of Labor. In the period from January 2021 to February 2022, almost 57 million Americans left their jobs.

Though some are terming it the “Great Resignation,” giving it a negative connotation, the implication is not entirely true since most of those who quit jobs did so for other opportunities. In the same 14 months, almost 89 million people were hired. There are almost two jobs open for every unemployed person in the United States, according to MarketWatch.

In an Economic Letter from the Federal Reserve Bank of San Francisco published in April, economics professor Bart Hobijn points out that high waves of resignations were common during rapid economic recoveries in the postwar period prior to 2000.

“The quits waves in manufacturing in 1948, 1951, 1953, 1966, 1969, and 1973 are of the same order of magnitude as the current wave,” he wrote. “All of these waves coincide with periods when payroll employment grew very fast, both in the manufacturing sector and the total nonfarm sector.”

Tyler Durden Sat, 06/25/2022 - 20:30

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Spread & Containment

Optimism Slowly Returns To The Tourism Sector

Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn’t much of an improvement, as travel…

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Optimism Slowly Returns To The Tourism Sector

Coming off the worst year in tourism history, 2021 wasn't much of an improvement, as travel remained subdued in the face of the persistent threat posed by Covid-19.

According to the United Nations World Tourism Organization (UNWTO), export revenues from tourism (including passenger transport receipts) remained more than $1 trillion below pre-pandemic levels in 2021, marking the second trillion-dollar loss for the tourism industry in as many years.

As Statista's Felix Richter details below, while the brief rebound in the summer months of 2020 had fueled hopes of a quick recovery for the tourism sector, those hopes were dashed with each subsequent wave of the pandemic.

And despite a record-breaking global vaccine rollout, travel experts struggled to stay optimistic in 2021, as governments kept many restrictions in place in their effort to curb the spread of new, potentially more dangerous variants of the coronavirus.

Halfway through 2022, optimism has returned to the industry, however, as travel demand is ticking up in many regions.

You will find more infographics at Statista

According to UNWTO's latest Tourism Barometer, industry experts are now considerably more confident than they were at the beginning of the year, with 48 percent of expert panel participants expecting a full recovery of the tourism sector in 2023, up from just 32 percent in January. 44 percent of surveyed industry insiders still think it'll take until 2024 or longer for tourism to return to pre-pandemic levels, another notable improvement from 64 percent in January.

Tyler Durden Sat, 06/25/2022 - 21:00

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